Canadian Consumer Confidence Was Suffering Before New Nafta

(Bloomberg) -- Canadian consumers were feeling the most dour about the economy since 2015 just days before the country reached an agreement with the U.S. to remain in the North American Free Trade Agreement.

A mere 12.5 percent of respondents predicted the economy would be stronger in six months, the lowest monthly result in more than three years, according to data from Nanos Research Group. The latest weekly telephone survey wrapped up on Friday, two days before Prime Minister Justin Trudeau and President Donald Trump came to terms on an agreement to replace the 24-year-old Nafta with the U.S.-Mexico-Canada Agreement, or USMCA.

The Nanos results show how heavily trade uncertainty had been darkening the mood of the nation. Readings on job security, housing and personal finances also deteriorated, while the broad Bloomberg Nanos Canadian Confidence Index fell to 55.2, down from 56.5 at the end of August, and close to June’s 54.9, which was a two-year low.

In the week leading up to the deal, Trudeau and Trump held no formal meetings on Nafta even though they were in the same room for United Nations meetings, and settled instead for what looked like a terse handshake at a luncheon. Trudeau later told reporters that “Canadians are tough negotiators” and “we won’t sign a bad deal.”

High Stakes

The new accord involves improved access to Canada’s dairy market for U.S. farmers, stronger intellectual property provisions, and tighter rules of origin for auto production, according to two senior Trump administration officials who spoke to reporters on condition of anonymity.

The stakes are high because the loss of Nafta and a fresh trade war including automobiles could chop 1.3 percentage points from economic growth over two years, and is already curbing investment intentions according to the Conference Board of Canada. The Canadian dollar rallied to a four-month high on news of the agreement.

Some 15.9 percent of respondents said local real estate prices would fall, the highest share since November 2016. On personal finances, 24 percent of people said they are now worse off compared with a year ago, up from 22 percent at the end of August. As for job security, those who feel at least somewhat secure in their positions fell to 67.1 percent, down from 67.7 percent at the end of last month.

The index is based on a four-week rolling average of 1,000 telephone respondents. The results are considered accurate within 3.1 percentage points, 19 times out of 20.

Quebec -- which holds an election Monday -- showed the highest confidence among five Canadian regions with a reading of 59.8 last week. That figure is higher than the 59.5 recorded four weeks ago and lower than the 12-month average of 61.3.

©2018 Bloomberg L.P.